28 February 2014, News Wires – Eni has suspended its reported Nkr60 billion ($10 billion) arbitration case against Statoil over high gas prices after the pair reached a preliminary pact to revise a long-term supply deal.
The Italian energy giant said it had reached a heads of agreement with Statoil for revisions to the contract including price and volume, with the pending compensation claim put on ice for 30 days so that a detailed deal can be hammered out.
Eni said it was part of efforts to renegotiate all of its third-party gas supply contracts as the company – one of Europe’s biggest gas importers – has seen higher contracted gas prices while market prices on the continent have fallen due to cheap supplies sourced from US shale as well as a demand slump amid economic recession.
While Eni has previously renegotiated prices on supply deals with Russia’s Gazprom and Sonatrach of Algeria, Statoil has refused to budge on its long-term supply contract with the Italian customer that has been linked to the oil price, despite reportedly offering price concessions to other buyers.
Eni, led by chief executive Paolo Scaroni, has therefore demanded compensation from the Norwegian supplier for charging prices above prevailing market levels since the deal was signed back in 1998.
The company has previously said the price it pays for Statoil’s gas is 30% to 40% above European market levels.
An eventual agreement between the pair would result in lower gas prices for Eni that would also benefit European consumers.
The company has estimated other revised supply deals have saved it nearly Nkr16 billion, though it now reportedly also faces having to renegotiate its pact with Gazprom that expired at the start of the year.